Most auditors would use a higher inherent risk for inventory when:
A) inventory turnover slowed during the year.
B) obsolete inventory has been identified.
C) there is a large number of errors in the previous year.
D) both A and C

Question

Quizplus · Accepted Answer

Inventory turnover slowing during the year indicates potential issues with management's ability to sell inventory, which could lead to a higher risk of overvalued inventory. Additionally, a large number of errors in the previous year would indicate a higher risk of misstatements in the current year. Obsolete inventory being identified may not necessarily indicate a higher inherent risk for all inventory, as it depends on the significance of the obsolete inventory in relation to total inventory.

Most Auditors Would Use a Higher Inherent Risk for Inventory